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Ten Strategies Silicon Valley Companies Use To Change The World

Marc Emmer is President of Optimize Inc.and an author, speaker and consultant specializing in strategy and strategic planning.

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In 2017 Amazon earned only a modest ($3 billion) net income relative to its size — and traded at 290 times its earnings. It’s as if while we were sleeping, someone rewrote the rules of competition. For years, business owners and their management teams have rationalized that the attributes of technology companies do not apply to them.

Yet in almost every sector of the economy, there’s a competitor that is at the bleeding edge of technology. Industry-leading companies like Amazon, Apple and Google are doing more than reshaping technology -- they are redefining how we strategize, transact and lead. The lessons we learn from them can be applied to any business.

Build An Agile Strategy Process

As a business strategist, I know that companies are applying more agile approaches to strategy. As a movement, agile is morphing from a product development methodology to a way of doing business. It requires companies to pivot quickly based on changing market conditions, so it's best to ensure that your team meets regularly to reformulate and review your strategy.

Build A Platform From The Ground Up

Amazon, Apple and Google are enjoying a competitive advantage by being platform companies. Armed with more data that's driven by algorithms and artificial intelligence, they are able to make real-time decisions about wants, needs and buying behavior.

Their solutions are end-to-end and provide opportunities for many profit centers. For example, it’s naturally synergetic for Google to sell a range of web services that complement its core offerings. When building your product line, engineer it from the ground up with the end in mind. That may include bundling the right e-commerce platform, with advanced reporting or a family of products that complement your initial products.

Develop A Unique Value Proposition

While new products like the iPhone XS garner all the attention, it’s business model innovation that has really spawned a revolution. Square, for example, has completely disrupted retail transactionsand replaced companies that took 100 years to erect (such as NCR). I believe creating true disruption requires rethinking an entire industry.

Our firm once worked with a financial services company to reimagine what its service could be. Only after a deep dive into every activity in the client process did they realize that they offered white glove services customers did not value. By making those offerings self-serve, they improved the client experience. Be abundantly clear on how valuable each component of your service bundle is.

Create Disruption At Scale

One of my heroes is Harvard Business School professor Clayton Christensen (I need to get out more). He first wrote about technology disruption in his 1997 book, The Innovator’s Dilemma. Since then, the word disruption has been both overused and misused. Christensen meant that a sweet spot exists in technology where companies can replace outdated business models with offers that reduce customers’ cost of ownership.

However, to achieve this level of disruption requires a company to scale at a profit. For example, Tesla’s Model S was viewed as disruptive, but it’s really the Model 3 (priced for the masses) that allows Tesla to scale. Tesla’s recent production issues illustratehow difficult it is to sell at volume and at a profit.

Offer A Unique Pricing Model

Silicon Valley companies are adopting distinctive, novel pricing models. For example, software as a service (SaaS) companies rely on subscription pricing to optimize value. Usage-based pricing, utilized by companies such as Airbnb and Uber, allows customers to pay for only the portion of products they actually use.

I believe such unique pricing models will only proliferate in our economy, even in business-to-business (B2B). Through Amazon Web Services, small companies rent servers on a fractional basis instead of owning them, much in the way they are renting fractional CFOs and CMOs. If you want to make your offer distinct, providing a unique pricing model is a fast way to differentiate at low cost.

Partner With Others

In creating end-to-end solutions, there is far greater cooperation across companies in technology than in other industries. After buying a product on Amazon, you can “like” it on Facebook or share on Instagram. Look for ways to build alliances with partners that can extend the value you create for customers.

Create Mass-Customized Offers

It has never been easier to buy almost any product exactly the way you want it. You can even order custom-fitted business shirts online (I just ordered some from Proper Cloth). Customization is very expensive and not scalable. But by offering several options, you can provide the“illusion of choice.” In your local poke restaurant, you can have salmon any way you want it, but eel is not on the menu.

Create Good, Better, Best

The good, better, best strategy, made popular by SaaS companies, is growing like wildfire. Consider B2B services offered by QuickBooks. By using an “anchor” high-end offer (around $30 per month), the value of the service is established so that the customer is more likely to buy the mid-priced offer.

Be Easy To Do Business With

Notable with many technologies is the seamlessness of transactions, as is the case with ordering an Uber. I believe that the benchmark for ease of doing business will be one click, and soon even zero clicks thanks to Alexa.

Develop An Employer Brand

Given the tight labor market, Silicon Valley companies are hyper-focused on putting their employees first. They are setting the bar on compensation, benefits and flexible work environments. Companies in more traditional industries are following suit just to remain competitive. But beware, offering more compensation without communicating a clear mission will only be perceived as inauthentic by the millennial workers whom companies are competing to hire. Be very clear in communicating your vision, setting expectations and bringing your employees along for the ride. Silicon Valley companies are changing the world — don’t get left behind.